Facebook does not follow industry standards aimed at ensuring that advertisers are billed only for "legitimate" clicks, a group of marketers suing the social networking service for click fraud allege in new court papers obtained by Online Media Daily.

The papers, filed as part of a motion to certify the lawsuit as a class-action, assert that Facebook violates industry guidelines -- including the Interactive Advertising Bureau's 2009 recommendations -- in several key ways. Among others, the service allegedly does not permit independent audits or publish a description of its methodology for counting clicks.

Marketers that buy ads on a pay-per-click basis often say they expect to pay only for "legitimate" clicks, which they define as clicks by users who are interested in visiting the marketers' sites. Marketers say they don't expect to pay for clicks generated by bots and other suspect sources, or for more than one click by the same user in a short time period.

Determining which clicks are legitimate often involves judgment calls. The marketers that brought suit say that Facebook sometimes goes against industry practices to err on the side of charging advertisers.

For instance, the marketers allege that Facebook initially excluded clicks by the same user within two seconds of each other, but subsequently decided to lengthen that time.

"Facebook's engineers concluded internally in late 2009 that it was a 'no brainer' that the filter should be changed to at least a 20 -- or even a 30-minute interval -- to conform with industry practice and ensure click legitimacy," the marketers allege. "Ultimately, Facebook's revenue objectives prevailed over any concern for click legitimacy, resulting in the decision to make the interval only 30 seconds between clicks."

The plaintiffs also allege that Facebook "refuses to be audited under IAB criteria," and "has flat out refused to allow any third party to test its wholly internal process for determining the legitimacy of the hundreds of millions of clicks it charges advertisers for each month."

The marketers add that Facebook "knows it would fail" an audit. "Facebook's own engineers have admitted internally that its click system is not IAB-compliant," the plaintiffs say in court papers, referencing testimony about an engineer's remarks to a colleague.

"In fact, when a junior member of the Facebook ad team sent an email to E&Y [Ernst & Young] suggesting that Facebook was interested in having E&Y do an IAB audit, that initiative was quickly quashed by a senior member of the Facebook finance team."

The litigation dates to 2009, when Facebook was sued in federal district court in San Jose, Calif. for click fraud by several search marketers, including Steven Price, who operated the car site drivedownprices.com.

Price alleged that Facebook billed him $500 for ads that appeared May 26 and June 21, 2009, but that analytics programs from Google and Statcounter.com show that around two-thirds of the clicks he was charged for did not take place. He said that Facebook acknowledged it had charged him for invalid clicks and gave him $105.01 in credits that could be used to purchase other ads, but argued in his initial court papers that he was entitled to a refund.

In April, U.S. District Court Magistrate Judge Howard Lloyd in San Jose, ordered Facebook to disclose the source code its systems use to identify and filter out invalid clicks. At the time, Lloyd also ordered the parties to keep the information confidential.

Earlier, Facebook unsuccessfully asked for the litigation to be dismissed on the grounds that all cost-per-click advertisers were required to agree to the company's terms and conditions, which the company says included the following language: "I understand that third parties may generate impressions, clicks, or other actions affecting the cost of the advertising for fraudulent or improper purposes, and I accept the risk of any such impressions, clicks, or other actions."

U.S. District Court Judge Jeremy Fogel in San Jose, Calif., instead ruled that the marketers can sue Facebook for allegedly charging them for "invalid" clicks, but not for "fraudulent" ones.

Odd headline given the fact that the judge specifically ruled that invalid clicks are the ones covered by the litigation, NOT the fraudulent ones.Facebook doesn't have similar exposure to click fraud (neither publisher nor cmpetetive click fraud) compared to most CPC publishers. For competetive fraud, unlinke search, it's not nearly as easy to get the FB system to show you or any profile you create the ads of your competition repetetively. It's possible but a heck of a lot of work.And FB has no publisher network.But bots and other sources of clicks are indeed invalid and must be dealt with properly.

Paul Benjou from The Center for Media Management Strategies,
September 8, 2011 at 9:35 a.m.

In disagreement .... when an action you take (or dismiss) in the face of industry standards allows you to profit, I place that in the fraud bucket. It's a matter of semantics but nonetheless inexcusable.

When there is nothing to hide, you hide nothing. Blatant fraud here. Remember what your parents told you: Once a liar, always a liar. FB has been proven to be a liar many times before. My friend Mike, target ace: That dime is worth something to FB - that'a hole of allotta dimes ! and it's worth something to the people wasting them.

Having worked on and in the CPC market as a seller and later a client, it is very concerning to see that companies would focus on their immediate revenue generating activities ahead of the interest of an advertiser. At the end of the day, this is a small industry and client and agencies do not forget. It is far more important to value a long term client/agency relationship ahead of short term growth because the long term growth will never be there if you hurt your clients. Any small or emerging company should watch this case and the facts closely..

"U.S. District Court Judge Jeremy Fogel in San Jose, Calif., instead ruled that the marketers can sue Facebook for allegedly charging them for "invalid" clicks, but not for "fraudulent" ones. "

So, fraudulent clicks are "valid"?

To me, not all invalid clicks are fraud, but all click fraud is invalid, at least to the advertiser.

If someone else sees this differently I would like to hear why they think so. Issues like this seem so crystal clear to me, yet a judge rules otherwise...!??

I'm glad someone mentioned conversion tracking. I had not heard that FB was going to offer it. But their lack of providing it and other anti-fraud protection seems to indicate their imaturity in the industry, and lack of concern for anyone but themselves. I think adult supervision is still needed...

Of course converstion tracking can still suffer from "conversion fraud" and "click laundering", but it's a crucial tool that no marketer should have to do without.